The Reserve Bank of India (RBI) has ordered the Bank of Baroda (BoB) to suspend new customer additions to its mobile application "bob World" on Thursday, due to concerns over customer addition processes. This decision marks the first time RBI has blocked a bank from onboarding new customers via mobile banking. The central bank has demanded rectification and strengthening of processes before further customer onboarding can continue.
BoB's shares fell on Wednesday following this directive. At the start of trade, BoB's share price was down 2.05% at ₹209.90. Analysts predict the ban may last several quarters and potentially affect growth in retail product segments given BoB's emphasis on digital sourcing and cross-selling via BOB World.
A report from Al Jazeera revealed that in March 2022 an official from the Bhopal zone linked unrelated mobile numbers to bank accounts to meet strict app registration targets. This unethical process involved generating a one-time password, backend signup, and subsequent removal of customers post-registration, with repeated misuse of the same mobile number.
The 'BoB World' app, launched in September 2021, onboarded three crore customers by fiscal 2023 end and handled significant daily transactions. The app is crucial to the bank's operations, contributing 43% of time deposits and handling 87% of funds transfers. As of March 2023, the bank achieved 53 million app downloads and 30 million active users.
A significant portion of the bank's operations have shifted online with 98% and 91% of savings and current account acquisitions respectively, along with 58% of fixed deposits, 42% of recurring deposits, and 61% of credit cards being sourced digitally. Furthermore, the bank sources 89% of personal loans and 67-68% of home/auto loans digitally, indicating an increase in the Retail, Agriculture and MSME (RAM) segments in total loans.
BoB has initiated corrective actions and pledged uninterrupted services for existing users while addressing RBI's concerns. It can resume new sign-ups only after satisfying RBI's requirements. Existing users will remain unaffected, while new customers can use other digital channels like net banking and WhatsApp banking. The restriction could potentially impede new account openings since the app also offers non-customers a video KYC feature for account opening and employs a two-factor authentication process. This directive doesn't impact other BoB digital channels.
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